Construction in Algeria – Key Trends and Opportunities to 2020

The Algerian construction industry will continue to expand in real terms over the forecast period (2016–2020), with investments in infrastructure construction, healthcare, the manufacturing industry, education facilities and housing projects. Forecast-period growth will also be driven by the country’s five-year investment program 2015–2019, under which the government aims to develop the country’s road, rail and airport infrastructure.

According to the International Monetary Fund (IMF), the government generates two-thirds of its revenue and 95.0% of its total export revenue from oil and natural gas. Since mid-2014, oil prices have fallen by more than 50.0%. Prices declined from US$108.0 per barrel in June 2014 to US$30.0 in December 2015. Despite the decline, the government remained dedicated to investments in priority infrastructure and development projects.

In real terms, the industry’s output value rose at a compound annual growth rate (CAGR) of 7.07% during the review period (2011–2015), although it will decelerate to 4.68% over the forecast period, due to a decline in oil prices and government plans to reduce expenditure in 2016 in an attempt to reduce the deficit.

Residential construction was the largest market in the Algerian construction industry during the review period, accounting for 40.6% of its total value in 2015. The market is expected to remain the largest over the forecast period, and will account for 41.0% of the industry’s total value in 2020, driven by government policies to support social housing. Affordable housing projects and government plans to develop underprivileged areas will also support this growth. Government subsidies will also help low- and middle-income earners purchase houses.

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Key Highlights

The industry will benefit from the government’s five-year development plan 2015–2019 to maintain sustainable economic growth and enhance living standards. It aims to double electricity production capacity by 2017, coupled with doubling gas production by 2020.

The Algerian government intends to diversify its nation energy mix and save fossil fuel by increasing the capacity of renewable energy power plants. Accordingly, in 2011, the government adopted national renewable energy development plan (2011–2030). Under this plan, it aims to produce 13,575.0MW from solar photovoltaic, 5,010.0MW from wind power, 2,000.0MW from Concentrated Solar Power (CSP), 1,000.0MW from biomass, 400.0MW from cogeneration and 15.0MW from geothermal.

The government’s focus on providing affordable houses via social housing programs is expected to drive the growth of the residential construction market over the forecast period. In 2015, the government launched a new five-year investment plan 2015–2019 worth DZD25.9 trillion (US$262.0 billion). Under this program, the government aims to develop transport infrastructure, healthcare facilities, housing, education and energy infrastructure.

The government aims to expand metro lines under the PPP model, to improve transport infrastructure. Accordingly, in January 2016, the government awarded a contract worth DZD20.7 billion (US$191.6 million) to Colas Rail for the extension of the metro network. Under the contract, the government aims to build five new railway stations and an extension of 3.6km subway lines towards south of the capital, and 1.7km towards the north.

The government is investing in the construction of new commercial and cargo ports to address congestion. In 2015, it announced plans to build a new commercial port in Cherchell and Ténès by 2025, with an expected investment of DZD200.0 billion (US$2.0 billion).

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